Will Two High Flyers Stay Aloft?

Dan Sullivan, editor of The Chartist, highlights two of the market’s hottest stocks in recent months—Baidu.com and Crocs—which are both back near their highs after last week’s market selloff.

Baidu.com, (NASDAQ: BIDU), the “Google” of China is on the move. In just the past month, the stock soared more than 40%, and was up 72% year-to-date. (It has bounced back to near its all-time high after selling off last week—Editor.)

Established in 2000 by Robin Li and Eric Xu, Chinese nationals who studied and worked overseas before returning to China, Baidu is now the leading Chinese-language search engine. Baidu’s mission is to be the ideal Chinese search engine, offering Chinese-language web pages, news, images and multimedia files through links on its website. Baidu also offers an effective pay-for-performance online marketing platform.

Headquartered in Beijing, the company’s name was inspired by a poem written more than 800 years ago during the Song Dynasty. The word “Baidu” has a literal meaning of “hundreds of times,” which represents a persistent search for the ideal. The company focuses on what it knows best: Chinese-language search.

Applying today’s technological advances to the world’s most ancient and complex language is a heady undertaking, and the company is continually improving its products and services. The company announced its second-quarter 2007 earnings last week, and it easily topped analysts’ expectations—Editor. ) The company, which has been surpassing earnings estimates by nearly 20% for the past four quarters, expects profits to increase by nearly 70% this year. (The stock closed at $209 Monday.)

Despite being famously lambasted as a fashion disaster on Bravo’s reality series “Project Runway,” Crocs (NASDAQ: CROX) are here, probably to stay. Originally created by its Boulder, Colorado, designers as a non-slip boating shoe, the colorful yet odd-looking footwear has become an all-out, all-purpose phenomenon.

Made of a closed-cell resin material called Croslite™, Crocs are lightweight, soft, non-marking and odor-resistant. The market potential for the shoes has helped the marketing effort sell to a broad range of consumers, expanding the product line to include 11 styles and 18 different colors.

Today, Crocs are available the world over, thanks to corporate expansion and the Internet. Since 2003, the company has continued to expand its product line, add warehouses and shipping programs and hire a senior management team. Currently sold through a wide range of distribution channels, Crocs are available through 6,000 store locations domestically, as well as more than 40 countries worldwide.

In May, the company announced that first-quarter income had nearly quadrupled the result of strong domestic and international sales. Net income rose to $24.9 million, or 61 cents per share, up from $6.4 million (or TK cents a share) in the same quarter a year ago. Revenue tripled to $142 million. Since that announcement, the stock price has jumped more than 70% and split two-for-one in June. (Crocs’ stock closed Monday at around $57, but was near its 52-week high Tuesday—Editor.)